Intangible Assets and Goodwill

12 Months Ended

Feb. 29, 2012

Intangible Assets and Goodwill [Abstract]

INTANGIBLE ASSETS AND GOODWILL

10. INTANGIBLE ASSETS AND GOODWILL

In accordance with the provisions of ASC Topic 350, Intangibles—Goodwill and Other, the Company reviews goodwill and other intangibles at least annually for impairment. In connection with any such review, if the recorded value of goodwill and other intangibles is greater than its fair value, the intangibles are written down and charged to results of operations. FCC licenses are renewed every eight years at a nominal cost, and historically all of our FCC licenses have been renewed at the end of their respective eight-year periods. Since we expect that all of our FCC licenses will continue to be renewed in the future, we believe they have indefinite lives. Radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under a Local Marketing Agreement by another broadcaster.

Impairment testing

The Company generally performs its annual impairment review of indefinite-lived intangibles as of December 1 each year, but given economic conditions and revenue declines in the domestic radio broadcasting industry and publishing industry, the Company performed an interim impairment review as of August 1, 2009. Impairment recorded as a result of our interim and annual impairment testing is summarized in the table below. We will perform additional interim impairment assessments whenever triggering events suggest such testing for the recoverability of these assets is warranted.

	Interim Assessment						Annual Assessment
	FCC Licenses		Goodwill		Definite-lived		FCC Licenses		Goodwill		Definite-lived		Total
Year Ended February 28, 2010		160,910		8,928		4,804		—		—		—		174,642
Year Ended February 28, 2011		N/A		N/A		N/A		7,005		—		—		7,005
Year Ended February 29, 2012		N/A		N/A		N/A		—		—		—		—

Valuation of Indefinite-lived Broadcasting Licenses

Fair value of our FCC Licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC Licenses, the Company uses an income valuation method when it performs its impairment tests. Under this method, the Company projects cash flows that would be generated by each of its units of accounting assuming the unit of accounting was commencing operations in its respective market at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in each market remains unchanged, with the exception that its unit of accounting commenced operations at the beginning of the valuation period. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license. Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control.

The projections incorporated into our license valuations take into consideration then current economic conditions. For example, in connection with our interim impairment assessment on August 1, 2009, the economic recession and credit crisis were considered as part of the assessment. Those events led to a further weakened and less profitable radio marketplace with a higher cost of capital, which impacted the interim assessment.

Assumptions incorporated into the annual impairment testing as of December 1, 2011 were similar to those used in our December 1, 2010 annual impairment testing. We expect the ongoing recovery in radio revenues to continue throughout our fiscal 2013. Below are some of the key assumptions used in our annual and interim impairment assessments. The methodology used to value our FCC licenses has not changed in the three-year period ended February 29, 2012.

	August 1, 2009	December 1, 2009	December 1, 2010	December 1, 2011
Discount Rate	12.6% - 13.0%	12.7% - 13.1%	12.0% - 12.3%	11.9% - 12.2%
Long-term Revenue Growth Rate	2.0% - 3.3%	2.0% - 3.5%	2.5% - 3.5%	2.5% - 3.3%
Mature Market Share	6.3% - 30.6%	6.2% - 30.0%	6.1% - 28.2%	6.4% - 29.4%
Operating Profit Margin	26.5% - 42.7%	26.0% - 40.9%	25.1% - 37.1%	26.0% - 37.2%

As of February 28 (29), 2011 and 2012, the carrying amounts of the Company’s FCC licenses were $328.8 million and $213.0 million, respectively. These amounts are entirely attributable to our radio division. The changes in FCC license carrying amounts during the years ended February 28 (29), 2011 and 2012 were attributable to an impairment charge related to our Austin radio cluster and the sale of a controlling interest in Merlin Media LLC, respectively. The table below presents the changes to the carrying values of the Company’s FCC licenses for the years ended February 2011 and 2012 for each unit of accounting. As noted above, each unit of accounting is a cluster of radio stations in one geographical market, except for our Los Angeles cluster in which KXOS-FM is being operated under a Local Marketing Agreement by another broadcaster.

	Change in FCC License Carrying Values
Unit of Accounting	As of February 28, 2010		Impairment			As of February 28, 2011		Sale of controlling interest in Merlin Media LLC			As of February 29, 2012
New York Cluster	$	145,588	$	—		$	145,588	$	(71,495	)	$	74,093
KXOS-FM (Los Angeles)		52,333		—			52,333		—			52,333
Austin Cluster		46,030		(7,005	)		39,025		—			39,025
Chicago Cluster		44,292		—			44,292		(44,292	)		—
St. Louis Cluster		27,692		—			27,692		—			27,692
Indianapolis Cluster		17,274		—			17,274		—			17,274
KPWR-FM (Los Angeles)		2,018		—			2,018		—			2,018
Terre Haute Cluster		574		—			574		—			574
Total	$	335,801	$	(7,005	)	$	328,796	$	(115,787	)	$	213,009

Valuation of Goodwill

ASC Topic 350 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company conducts the two-step impairment test on December 1 of each fiscal year, unless indications of impairment exist during an interim period. When assessing its goodwill for impairment, the Company uses an enterprise valuation approach to determine the fair value of each of the Company’s reporting units (radio stations grouped by market and magazines on an individual basis). Management determines enterprise value for each of its reporting units by multiplying the two-year average station operating income generated by each reporting unit (current year based on actual results and the next year based on budgeted results) by an estimated market multiple. The Company uses a blended station operating income trading multiple of publicly traded radio operators as a benchmark for the multiple it applies to its radio reporting units. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. Therefore, the market multiple used as a benchmark for our publishing reporting units is based on recently completed transactions within the city and regional magazine industry or analyst reports that include valuations of magazine divisions within publicly traded media conglomerates. For the annual assessment performed as of December 1, 2011, the Company applied a market multiple of 7.0 times and 6.0 times the reporting unit’s operating performance for our radio and publishing reporting units, respectively. Management believes this methodology for valuing radio and publishing properties is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons and market transactions. To corroborate the step-one reporting unit fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit.

This enterprise valuation is compared to the carrying value of the reporting unit for the first step of the goodwill impairment test. If the reporting unit exhibits impairment, the Company proceeds to the second step of the goodwill impairment test. For its step-two testing, the enterprise value is allocated among the tangible assets, indefinite-lived intangible assets (FCC licenses valued using a direct-method valuation approach) and unrecognized intangible assets, such as customer lists, with the residual amount representing the implied fair value of the goodwill. To the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill, the difference is recorded as an impairment charge in the statement of operations. The methodology used to value our goodwill has not changed in the three-year period ended February 29, 2012.

As of February 28 (29), 2011 and 2012, the carrying amount of the Company’s goodwill was $24.2 million. The table below presents the various reporting units’ goodwill carrying values as of February 28 (29), 2011 and 2012. As noted above, each reporting unit is a cluster of radio stations in one geographical market and magazines on an individual basis. We have previously written off all goodwill associated with our Austin cluster except for the portion of goodwill that exists at the Austin partnership level attributable to noncontrolling interests.

	Goodwill Carrying Values
Unit of Accounting	As of Febraury 28 (29), 2011 and 2012
Indianapolis Cluster	$	265
Austin Cluster		4,338
Slovakia		1,703
Total Radio Segment		6,306
Country Sampler		9,385
Indianapolis Monthly		448
Texas Monthly		8,036
Total Publishing Segment		17,869
Grand Total	$	24,175

Definite-lived intangibles

The following table presents the weighted-average remaining useful life at February 29, 2012 and gross carrying amount and accumulated amortization for each major class of definite-lived intangible assets at February 28 (29), 2011 and 2012:

			February 28, 2011						February 29, 2012
	Weighted Average Remaining Useful Life (in years)		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Foreign broadcasting licenses		9.1	$	8,716	$	6,331	$	2,385	$	8,716	$	6,976	$	1,740
Favorable office leases		0.5		688		655		33		688		677		11
Trademarks		13.1		749		478		271		749		502		247
TOTAL			$	10,153	$	7,464	$	2,689	$	10,153	$	8,155	$	1,998

During the year ended February 28, 2010, Emmis determined the carrying value of our Bulgarian foreign broadcast licenses, Orange Coast trademarks, Orange Coast noncompete and other Orange Coast definite-lived intangible assets exceeded their fair value. As such, we recognized a noncash impairment loss of $2.0 million and $2.8 million related to the Bulgarian and Orange Coast definite-lived intangibles, respectively. Total amortization expense from definite-lived intangibles for the years ended February 2010, 2011 and 2012, was $1.6 million, $1.1 million and $0.7 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles:

YEAR ENDED FEBRUARY 28 (29),
2013	$	230
2014		216
2015		214
2016		214
2017		214